ITO, Jaipur V. K.Y.CONTINENTAL INTEREAR P.LTD., Jaipur

ITA 183/JPR/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5139 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 4 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 24-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROSHANTA MEENA JCIT DHK
• Keywords: Revenue expenditure; Capital expenditure
• Section: 133A

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS [KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YAD AV, AM VK;DJ VIHY LA-@ ITA NO.183/JP/15 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2009-10 INCOME TAX OFFICER, WARD 4(2), JAIPUR CUKE VS. M/S K.Y. CONTINENTAL INTERIORS (P) LTD.E-43A ROAD NO. 1B, VKI AREA, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AABCK 6337 Q VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL ( CA) JKTLO DH VKSJ LS@ REVENUE BY : MS.ROSHANTA MEENA (JCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 13.05.2016 ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 11/07/2016. VKNS'K@ ORDER PER SHRI VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A)-II, JAIPUR DATED 24.12.2014 WHEREIN THE REVENUE HAS TAK EN FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) HAS ERRED IN RESTRICTING THE PENALTY U/S 271(1)()C) ON TRADING ADDITION OF RS. 2,81,481/- AS AGAINST THE TRADING ADDITION OF R S. 12,14,417/- MADE BY THE AO. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING PENALTY LEVIED ON THE ADDITION MADE BY AO OF RS. 31,03,340/- U/S 40(A)(IA). ITA NO.183/JP/15 ITO, WARD 4(2), JAIPUR VS. M/S K.Y. CONTINENTAL INT ERIORS PVT. LTD. JAIPUR 2 2. REGARDING GROUND NO. 1, BRIEFLY THE FACTS OF THE CASE ARE THAT A SURVEY U/S 133A WAS CONDUCTED AT THE BUSINESS PREMISES OF THE ASSESSEE WHEREIN A DIARY (INVENTORISED AS ANNEXURE A-8) WAS IMPOUNDED . IN THIS DIARY, NOTINGS OF TRANSACTIONS MADE BY THE DIRECTOR OF THE APPELLANT COMPANY PERTAINED TO TRANSACTIONS OF SALES CONTAINING THE DATE OF TRANSA CTION, DESCRIPTION OF GOODS SOLD AND NAME OF THE CUSTOMER WERE FOUND. IN VIEW OF THESE TRANSACTIONS NOT RECORDED IN THE BOOKS OF ACCOUNTS, THE AO ESTIMATES THE SALES AT RS. 5,50,00,000/- AS AGAINST SALES OF RS 4,99,54,71 8 AND APPLIED G.P. RATE OF 24.12% WHICH RESULTED IN AN ADDITION OF RS.12,14,41 7/-. THE CIT(A) AS WELL AS THE COORDINATE BENCH UPHELD THIS ADDITION MADE BY T HE AO. THE AO THEREAFTER LEVIED PENALTY ON THIS ADDITION OF RS. 12,14,417/-. 2.2 BEING AGGRIEVED, THE APPELLANT CARRIED THE MATT ER BEFORE THE LD CIT(A). THE RELEVANT FINDINGS OF LD CIT(A) AT PARA 2.4.2 AR E REPRODUCED AS UNDER: IN APPEAL, THE APPELLANT REITERATED ITS STAND THAT THE TRANSACTIONS RECORDED IN THE DIARY WERE NOT SALES BUT ORDERS REC EIVED FROM CUSTOMERS. IT WAS ALSO STATED THAT THE 18 TRANSACTIONS NOT RE CORDED IN THE BOOKS OF ACCOUNTS, WERE ORDERS THAT HAD BEEN CANCELLED. THI S STAND OF THE APPELLANT CANNOT BE ACCEPTED BECAUSE THE DIARY CON TAINED A VERY SPECIFIC NARRATION DESCRIPTION OF GOODS SOLD. AL SO, COMPLETE DETAILS WITH RESPECT TO THESE TRANSACTIONS IN THE NATURE OF NAME OF CUSTOMERS, DATE AND DESCRIPTION OF GOODS SOLD HAVE BEEN NOTED IN THE DIARY WHICH SHOWS THAT THESE SALE TRANSACTIONS DID TAKE PLACE B UT WERE NOT RECORDED IN THE BOOKS OF ACCOUNTS. THE APPELLANT HAS ALSO C ONTENDED THAT PENALTY U/S 271(1)(C) CANNOT BE LEVIED ON ADDITIONS MADE ON ESTIMATED BASIS. THE APPELLANT HAS CITED VARIOUS CASE LAWS TO SUPPO RT HIS CONTENTION. WHILE PENALTY CANNOT BE LEVIED ON ADDITIONS BASED O N ESTIMATE, IN THIS CASE, THERE IS SPECIFIC EVIDENCE WITH RESPECT TO U NACCOUNTED SALES OF RS. ITA NO.183/JP/15 ITO, WARD 4(2), JAIPUR VS. M/S K.Y. CONTINENTAL INT ERIORS PVT. LTD. JAIPUR 3 11,67,000/-. THEREFORE WITH RESPECT TO INCOME FRO M THESE UNRECORDED SALES AMOUNTING TO RS.2,81,481/-(24.12% OF RS.11,67 ,000/-THERE IS CONCEALMENT OF PARTICULARS OF INCOME. ALSO THERE IS NO ESTIMATE INVOLVED. THEREFORE PENALTY U/S 271(1)(C) ON THIS INCOME OF R S.2,81,481/-IS UPHELD FOR CONCEALMENT OF PARTICULARS OF INCOME. LEVY OF PENALTY U/S 271(1)(C) ON THE BALANCE AMOUNT OF ADDITION OF INCOME PERTAIN ING TO ESTIMATION OF SALES OF RS. 5,50,00,000/-(LESS RS. 11,67,000/-) AN D APPLICATION OF G.P. RATE OF 24.12% IS NOT SUSTAINED SINCE THIS ADDITION HAS BEEN MADE ON ESTIMATED BASIS AND IN VIEW OF THE CASE LAWS LAYING DOWN THE RATIO THAT PENALTY U/S 271(1)(C) CANNOT BE LEVIED ON ADDITIONS MADE ON ESTIMATED BASIS. 2.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PURSUED THE MATERIAL ON RECORD. THE LD CIT(A) HAS EXAMINED THE MATTER AT L ENGTH AND CAME TO A CONCLUSION THAT EXCEPT FOR UNACCOUNTED SALES IN RES PECT OF 18 TRANSACTIONS AMOUNTING TO RS 11,67,000 WHERE THERE IS SPECIFIC E VIDENCE, REST ALL ADDITIONS HAVE BEEN MADE ON AN ESTIMATION BASIS. THE REVENUE HAS NOT BEEN ABLE TO CONTROVERT THE SAID FINDINGS OF THE LD CIT(A) AND H ENCE THE SAME BECOME THE FINAL FINDING OF FACTS. THE LAW IS WELL SETTLED TH AT WHERE THE ADDITIONS HAVE BEEN MADE ON PURELY ESTIMATE BASIS AND THERE IS NO EVIDENCE OR REASONABLE JUSTIFICATION IN SUPPORT OF SUCH ESTIMATION, PENALT Y CANNOT BE LEVIED IN RELATION TO SUCH ESTIMATED ADDITIONS. IN LIGHT OF THE SAME, WE SEE NO JUSTIFICATION TO INTERFERE WITH THE ORDER OF LD CIT(A). HENCE, GROU ND NO. 1 OF THE REVENUE IS DISMISSED. 3. THE GROUND NO. 2 RELATES TO LEVY OF PENALTY U/S 271(1)(C) ON DISALLOWANCE OF INTEREST EXPENDITURE U/S 40(A)(IA) OF RS 3,21,95 2 ON ACCOUNT OF NON- DEDUCTION OF TDS AND DISALLOWANCE OF INTEREST OF RS 27,81,388 HOLDING THE SAME AS CAPITAL EXPENDITURE. ITA NO.183/JP/15 ITO, WARD 4(2), JAIPUR VS. M/S K.Y. CONTINENTAL INT ERIORS PVT. LTD. JAIPUR 4 3.1 FIRSTLY, REGARDING LEVY OF PENALTY ON DISALLOWA NCE OF INTEREST EXPENDITURE U/S 40(A)(IA) OF RS 3,21,952, IT IS NOTED THAT THE COORDINATE BENCH IN ITA NO. ITA NO.595/JP/2013 IN ASSESSEES OWN CASE FOR A.Y. 2009 -10 VIDE ORDER DATED 14.12.2015 HAS DELETED THE DISALLOWANCE OF SAID INT EREST EXPENDITURE OF RS 3,21,952. WHERE THE ADDITIONS ITSELF HAVE BEEN DELETED, THERE IS NO BASIS FOR LEVY OF PENALTY. 3.2 REGARDING LEVY OF PENALTY ON INTEREST EXPENDITU RE OF RS 27,81,952 WHICH HAS BEEN TREATED AS CAPITAL INSTEAD OF REVENUE AND SUBSEQUENTLY CONFIRMED BY THE COORDINATE BENCH, IT IS A MATTER WHERE THE REVE NUE WAS OF THE OPINION THAT THE NATURE OF EXPENDITURE WAS CAPITAL IN NATUR E AND HENCE THE SAME SHOULD HAVE BEEN CAPITALISED WITH THE COST OF PLANT AND MACHINERY INSTEAD OF CLAIMING AS REVENUE EXPENDITURE. IT IS NOT A CASE O F FURNISHING INACCURATE PARTICULARS OF INCOME AS THERE IS A COMPLETE DISCLO SURE IN THE RETURN OF INCOME AND THE FACT THAT A PARTICULAR EXPENDITURE IS CAPIT AL OR REVENUE IS DEBATABLE. WE ACCORDINGLY CONFIRM THE FINDINGS OF LD CIT(A) WH ICH IS REPRODUCED AS UNDER: THIS CLAIM OF EXPENDITURE HAS NOT BEEN FOUND TO BE NON GENUINE, EXCESSIVE, INACCURATE OR ERRONEOUS. THE ONLY DISPU TE IS WHETHER IT IS REVENUE OR CAPITAL IN NATURE. IN VIEW OF THE ABOVE CASE LAWS, IT IS HELD THAT PENALTY U/S 271(1)(C) CANNOT BE LEVIED ON DISA LLOWANCE OF EXPENDITURE HELD TO BE CAPITAL IN NATURE SINCE THE ASSESSEE HAS FURNISHED THE RELEVANT PARTICULARS OF INTEREST EXPENDITURE WH ICH HAS BEEN HELD TO BE INCURRED BY IT. THEREFORE, LEVY OF PENALTY U/S 271 (1)(C) ON THIS DISALLOWANCE OF INTEREST EXPENDITURE IS NOT SUSTAIN ED. 3.3 IN LIGHT OF ABOVE, WE CONFIRM THE ORDER OF LD C IT(A) DELETING THE LEVY OF PENALTY IN RESPECT OF INTEREST EXPENDITURE. HENCE, GROUND NO. 2 OF THE REVENUE IS DISMISSED. ITA NO.183/JP/15 ITO, WARD 4(2), JAIPUR VS. M/S K.Y. CONTINENTAL INT ERIORS PVT. LTD. JAIPUR 5 IN THE RESULT THE APPEAL FILED BY THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11/0 7/2016. SD/- SD/- ( KUL BHARAT ) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER JAIPUR DATED:- 11/ 07/2016 PILLAI VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- THE ITO, WARD 4(2), JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- M/S K.Y. CONTINENTAL INTERIORS PVT. LTD. JAIPUR 3. VK;DJ VK;QDR@ CIT II, JAIPUR 4. VK;DJ VK;QDRVIHY@ THE CIT(A)-II, JAIPUR 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 183 /JP/2015) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR